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tv   Street Signs  CNBC  March 8, 2016 4:00am-5:01am EST

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good morning and welcome to "street signs." i'm nancy hulgrave, and these are your headlines. well, miners reverse course on weak chinese trade data as the metal analysts at goldman sachs warn there is more downside to come. burrberry turns heads amid reports the luxury brand is trying to fend off a mystery investor that could be preparing a takeover bid. and escaping the valley of tears. rwe shares outperform in germany as they reassure investors on loss-making unit and power. we speak to the cfo first on
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cnbc. >> and nike drops five-time grand slam tennis champion maria sharapova after she admits to failing a drug test. >> i made a huge mistake, and i -- i let my fans down. i've let the sport down that i've been playing since the age of 4 that i love so deeply. good morning and welcome to "street signs." well, here we are in red, clearly outpacing the green. the stoxx europe 600 off about 1.3%. you can blame is on the weak chinese data. you can blame it a bit. we are missing out on the continued gains we saw on wall street overnight. the picture here is very different. we have some individual movers tied to earnings, management
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changes. but let's take a look at how these moves are playing out. just an hour into trade and firmly in the red with the ftse 100 off about 1%. we're seeing a reversal in some of the basic resources. the xetra dax off just about 1.5%. the french cac 40 falling by 1.6%. let's look at the miners. they have been in focus throughout the week. a lot of enthusiasm starting off the week that we could finally be seeing a rebound. we're looking a the a rally of over 70% since the lows of january 20th. a very different story today. we're seeing the prices come off about 4. 5%. this comes not only with some expectations that perhaps the relief rally we saw on commodities could be overdone, but we also got a note from
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goldman sachs. the dollar moves could be misplaced. they're saying nothing substantial has changed in the real economy to change this picture. so perhaps that weighing on the mining sector this morning as well. let's get in closer at iron ore specifically. we saw a near 20% rally in iron ore just yesterday. as you can see, prices up now about 1.2%. overall, the three-month picture up 51%. again, as part of that goldman note, they're really pouring cold water on expectations of further increases in iron ore. now let's get over to oil. again, so much of the optimism in the u.s. has been tailored to the rise we've seen in wti crude the last couple of days. now we're seeing brent come off a little bit. brent getting closer to that $41 barrel level today. now off about 0.4%. wti cruel still failing to get to that $40 level. mean while, we have to keep in mind the data we've been getting
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out of data this morning. with the export data missing expectations and falling by 25.4%. that would be in u.s. dollar terms. now, imports also disappointed, dropping 13.8%. this of course key as we look at expectations for the government trying to transition the economy to a more services consumption led economy as well. let's get more reaction on the data and the broader market reaction in asia. sri is standing by in singapore with the latest. >> hi there, nancy. let me just bookend the conversation on the chinese data. whichever way you slice it, this was a very, very down beat number, both on the external side and import side. that speaks volumes about the sluggish pace of economic activity still within the mainland's domestic economy. so the markets looked at this and took these numbers at face value, which surprised me a little bit because the february data set is usually distorted typically by the seasonal
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numbers, but the associated with the chinese new year holiday. did a pretty good job of shrugging off toward the end of the session. a degree of composure. the shanghai composite was trading in negative territory for a large part of the day. but a degree of stability at the close. still looks quite sticky and elusive. elsewhere, the mood was decidedly cautious. a lot of concern about what the ecb will do on thursday. so that's the major risk event. people seem to be sitting on their hands to a large extent. nikkei 225 dragged down below 17,000. let me get back to the commodities cycle and this monster rally we saw in iron ore. looks like a massive head fake in retrospect.
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yes, the miners did have their day in the sun. aussie dollar was down and broader index down by 0.7%. we're all marking time just ahead of thursday and what mr. draghi will deliver. will he be aggressive, or will there be disappointment like back in december? a lot of uncertainty. back to you. >> that's right, sri. markets taking a breather here. but the shanghai composite taking the china data in stride. burberry, one of the european companies we keep a close eye on, the stock in the news for a different reason today. shares moving higher this morning amid reports that they could face a possible takeover bid from a mystery investor. this investor has built a near 5% stake in the firm. hsbc, the custodian for the
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position, is not disclosing the identity of its client. it's thought rival luxury groups could be buying up burberry stock to capitalize on the recent fall in share price. mean while, rwe has annou e announced plans to comprehensively restructure npower. they swung to an operating loss of 170 million euros in 2015 largely due to billing issues. overall, the german utility giant guided for lower profits in 2016 and posted a 5.5% drop in full-year earnings. we'll get into these results at 11:30 cte when we'll speak first on with rwe's cfo. and a sugar rush for lindt with forecasts rising 11%. the chocolate maker confirmed
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its 2016 guidance and sweetened its dividend by 10.3%. joining us now for more reaction on the results is john cox, head of swiss equities. thanks for joining us this morning. before we got the results, you actually said you did not prefer lindt. in fact, your price target is quite a bit below where we're trading today. looking at the profits and margins, have you changed your mind? >> i would say marginally in terms of the company, you know, always delivers a solid set of figures. i would point out, though, that probably consensus expectations have slipped over the last couple of weeks. it probably is a beat as it were on slightly lower sort of consensus expectations. i think the top line obviously looks fantastic. over 7% organic sales growth. compared to a sector maybe
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growing 3.5%, 4%. so as always, a good quality setd of figures. however, organic sales are decelerating somewhat. the year before, they had somewhere close to 9% organic sales growth. i tend to think after this fantastic organic growth sales we've seen in the last few years driven by its retail expansion, maybe that's coming to a bit of an end. i still think they'll meet their targets of 6% to 8% organic sales growth going forward, but potentially maybe towards the lower end of the range rather than beating it as it has done in the last two years or so. >> and you've highlighted not just with lindt, but pricing pressures with the food and beverage sector as a whole weighing on margins. when we talk about lindt specifically, what do you suggest? a lot of analysts suggest the cocoa prices could continue to go up.
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is that a pattern you expect? >> yeah, i think the jury is out on whether the strong rally we've seen in cocoa is really led by fundamentals. it's a pretty small market open to speculation and dare i say manipulation in some cases. so that's something to keep in mind. but certainly there are concerns about the supply situation, sort repercussions of el nino. the emerging world is slowly buying more chocolate. it is a long-term trend, of course, because chocolate is very dependent on climate. if it's a very hot country, very difficult to sell chocolate. i think longer term, people are concerned there may be a structural deficit, so that would continue to push up cocoa
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prices. certainly, shorter term, we're in a very deflationary environment across the board. if you look at agricultural commodities, a fair bit of pressure. that's because of concerns about the macroeconomic situation and deflationary environment. now, to come to lindt specifically, again, a good margin figure there. they added 20 basis points year on year. raw materials actually went up as a proportion of sales. where they've come down was in operating expenses. i would tend to think that maybe the marketing growth wasn't as fast as the sales growth during the year, and maybe that's how they've managed to expand the margin, which was actually driven by the european business. they added 100 basis points in europe to their margin, which again is a good result,
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offsetting weakness in north america and in the rest of the world. >> some reasons to be positive there for lindt, despite a dip we've seen in the stock. but broadening it out to the sector, when you talk about this deflationary environment, what names do you like when it comes to the consumer staples food and beverage? >> yeah, i think actually from a top-down point of view, we have just cut our rating on food and beverages to underweight from neutral. if you look at the multiples in the space, they're really at sort of absolute and relative records versus the overall space. tends to be driven because people think they're decent in terms of being able to bang out decent earnings growth, even in pretty tough environments. and of course they're well supported by dividend yields in many cases in an environment where obviously there's not much in the way of interest. so within the space, i would
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prefer probably self-help stories. z danone products are really coveted by the chinese. that's one to look out for. another one is listed in germany, a midcap. we think maybe sugar prices have bottomed. that would help that one in the medium term. to come into the beverages space, we like the look of remi. it looks like chinese demand is slowly recovering after obviously being pretty hurt by
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the anti-gifting campaign we've seen for high-end spirits over the last couple years. so that's one we prefer. we tend to be a bit more cautious on some of the big names in the drink space. abi, for example. a little cautious. it seems that packaged food and drinks overall are maybe not quite as attractive as they were for the millennials. they want more of a drinking experience. abi, we think, is losing share in north america. although, certainly a good company. >> no coincidence there. craft beer, definitely the way to go forward. john, thank you for joining us. meanwhile, keeping the focus on some earnings movers here this morning. merck shares are trading lower after its annual dividend disappointed. the german drug maker guided for higher rnd costs.
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speaking to cnbc earlier, the cfo said he's not seeing signs of a slowdown in china. >> translator: we have never really seen a china downturn in our business so that we would have to talk about a recovery story as of today. china has already a very strong performance in our businesses from q-3 last year onwards. also, q-4 reconfirmed the chinese strength in our portfolio. china continues to be one of the major growth drivers of the group. also for our business in asia pacific. >> paddy power says the integration of the two businesses is progressing well. this is helped by strong trading momentum. this comes as the newly merged company posted 2015 underlying ebitda of 296 million pounds. and world pay shares slumping after reporting a 2015 net loss of almost 30 million
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pounds. this its first result since listing on the london stock exchange. the newcomer has kept its medium term guidance unchanged. and so much still to come here on "street signs." get your questions in. you can find us on twitter. @streetsignseurope. you can find me direct directly @nancycnbc. coming up later in the show, swiss watch maker tag heure becomes the latest sponsor to drop maria sharapova after she failed a drug test. >> i made a huge mistake. i let my fans down. i've let the sport down.
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good morning and welcome back to "street signs." just a little over an hour into trade this morning we are seeing a lot of red across the screen
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with the overall successtoxx eu 600 down just about 1%. this is the second day of losses here in europe even though there were modest gains on wall street. but the china data disappointing today. we have commodities on the back foot. all of this weighing as well as some individual earnings movers throughout the morning. meanwhile, we also want to give you an update on japan's largest telecommunications firm, which is aiming to acquire dell's i.t. service business. here's the latest. >> yes, ntt is expected to offer more than 400 billion yen or around $3.5 billion for dell's i.t. services arm. it consists mainly of pero systems, which is a firm that ross perot founded and dell bought in 2009. it designs and operates i.t.
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systems for customers such as medical institutions and local governments and generates around $3 billion annually. meanwhi meanwhile, dell is planning to buy emc, which is a major data storage provider, for around $67 billion and is seeking to sell off its noncore businesses to raise the funds needed. ntt representatives are to meet with dell executives to propose the acquisition within the week. it hopes to build on dell's technology and strengthen its presence in the u.s. market. ntt's earnings generated overseas hovered around 14% of the total last fiscal year, and the firm aims to double that to around $22 billion by march 2018. now, expanding into markets overseas is a common challenge for japanese telecommunications firms since the domestic market has little prospect of growth. so softbank bought sprint in 2013 and similarly, kddi has added mobile phone markets in mon go la and myanmar.
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that's all from the nikkei. back to you. >> thank you for that update. meanwhile, we continue to keep on countdown for the ecb decision on thursday. different views are happening within the fomc when it comes to the view on inflation. stanley fischer says he sees the first stirrings of higher prices in the u.s., but in an exclusive interview with cnbc's steve liesman, they'll be watching the data closely and still wants to see signs of persistence before raising rates again. >> of course, if the dollar strengthens, that means manufacturers' exports are weakened, profits come down, core import prices come down. so there's an interaction between the strength of demand abroad. there's been very deficient global demand for some time. what we all need to be doing at central banks and we're generally including fiscal authorities around the world is
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working to raise global demand. not shift it across borders. >> eu leaders appear to have reached a break-through agreement with turkey on the migrant crisis, this following late-night talks and a deal brokered by angela merkel that still needs to be signed off on later this month. >> translator: this proposal that was brought forward by the turkish side is a breakthrough if it is to be realized because it would break this vicious cycle of entering illegally on a boat and as a result being given the right to stay in europe. we will have to turn this around in order to achieve an orderly migration. >> now, despite the latest development, in an exclusive interview with cnbc, the vice chairman of angela merkel's party said a long-term solution and more solidarity was still needed. >> germany is a big country, and we are a rich country, wealthy
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country so to speak. many of the germans are really helping. it's a lot of help going on, which is fantastic to see. if you go to the refugee camps in germany and see how many germans are working over there. on the other hand, we have to find solutions because it cannot be double or three times more. then it's coming to a difficult situation. we have to find solutions, and i'm quite happy with the results. if you have a possibility with turkey to stop it, it sounds positive at the moment. >> with the migrant crisis, as we saw is --
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>> it cannot be the case that everybody is saying, okay, beautiful, let the germans do it. at the same time, we have to pay 30% of the net money in brussels. that's not fair, and we want to have a little more solidarity. >> joining us now around the desk, julia chatterley. you've been taking a close look at what's going on in brussels when it comes to the discussions around the migrant situation. we talk over and over again
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about how much debate, discussion happens at brussels, but sometimes with very little result. although, people seem to be a bit more optimistic on what was struck last night. do you think this latest agreement has real potential? >> we have the principle princi agreement. this at least suggests that turkey is willing to see all those that cross the border from turkey to greece returned, including syrians. now, that was some of the debate we had yesterday. for every syrian that's returned, they will then be given a place somewhere in europe. so what they're trying to do is break the smuggling ring that's going on with the transfers across and sending a message as well. t 1200
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perhaps this deal and other discussions aren't fully taken into account. >> the u.k. is not relevant in this. obviously the full story is important, but in this issue, cameron very keen to point it out. >> certainly will play a role when we're waiting, talking about just how the bank of england is standing by for this referendum. thank you so much for joining us. meanwhile, meetings until 5:00 a.m. in the morning and lines of reporters waiting for a run on the banks that just never happened. well, those are just some of the key moments in the bailout of cyprus back in 2013. now cyprus has been given the green light to exit its program ahead of schedule. this will leave greece as the last bailout member. and we just want to give you some breaking news coming in
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related to volkswagen in the last few minutes here. german prosecutor has now said that they're widening a probe into the volkswagen diesel emissions scandal to investigate more employees. they're now saying they intend to investigate 17 employees. that comes down from a previous number. so they're saying up from six employees. this comes from the german prosecutor. they're saying this is part of the diesel investigation, saying the number has risen, although none are from the management board. that line very key there as well, saying none of this increase to 17 employees come from management. there have been so many questions over who knew what when. various allegations tied to top members of management, wondering how they didn't know about this device. so here we have the german prosecutors expanding the investigation to additional employees, but we still need to wait on additional information to see if the company will comment on that. meanwhile, let's give you
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another look at the miners before we head to break. we have been watching the moves all week. if you can just take a look here on the two-week basis, we're seeing strong moves with the likes of glenncore. rio ti nto trailing just barely but higher by 9%. we'll bring you that in just a few minutes.
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good morning and welcome back to "street signs." i'm nancy hulgrave. these are your headlines. well, miners reverse course on weak chinese trade data as the metal analysts at goldman sachs warn there is more downside to come. burberry turns heads amid reports the luxury brand is trying to fend off a mystery investor that could be preparing a takeover bid. mark carney gets ready to be quizzed by lawmakers after the
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bank of england promises more liquidity around the referendum. and nike drops five-time tennis grand slam champion maria sharapova after she admits to failing a drug test. >> i made a huge mistake, and i let my fans down. i've let the sport down that i've been playing since the age of 4 that i love so deeply. good morning and welcome back to "street signs." we want to bring you to a live shot of bank of england governor mark carney, where he's speaking before the treasury select committee. he's talking about the costs and benefits of britain's membership of the eu. this comes on the heels of a promise to offer more liquidity for banks around the eu referendum in june. we want to hear from you on this topic. do you think this is a wise move? some were surprised by this
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move, given they took a similar step around the scottish referendum. you can get in touch with us on e-mail for the show directly. that address is get your tweets in. tweet me directly @nancycnbc. the show as well well, @streetsignscnbc. i'm flying solo here, missing louisa today. get your comments and questions in. meanwhile, let's get a check on how u.s. markets are set to open. we saw the dow, s&p 500 closing higher for five straight days yesterday. those markets touching fresh two-month highs. the nasdaq closing in negative territory. here we are with u.s. markets. a lower open. dow jones called lower after negative moves in asia and europe. once again, we have seen europe move firmly to the downside with
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the stoxx europe 600 off about 0.6%. the xetra dax off 1%. we've seen weakness in the basic resources. some questioning perhaps these stocks are overbought. the ftse mib lower by just 0.6%. keeping in mind these moves we've seen in europe, you have to take into account the data we got out of china a bit earlier with exports seeing their worst fall since may 2009. now, slumping over 25% when you look at dollar terms just last month. also of key concern here would be the imports, which fell more than expected, dropping 13.8%. nevertheless, the shanghai composite taking the news in stride, clawing back earlier losses to close just above the flat line. well, let's get to charlie.
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thank you for joining us this morning. here we are, another piece of disappointing data coming out of china. this comes just as we got the five-year plan really trying to re-ensure investors. when you look at the data, is there reason to be concerned about their growth targets? >> morning. thanks for having me on. look, i think if you look at what they're saying and what they're doing right now, they're definitely promoting growth. over the last few years, they've tried to balance growth, reform, and deluneveraging. if you look at the data that came out over the lunar new year, they're promoting growth. the pboc governor has said reform is still good and we need to pursue that, but we need to do it more effectively. so i think what you can see is more lending being put into the economy and to an extent that's kicking the can down the road.
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it may ease some investors' concerns, but it may make other investors think it's the same problems. >> kicking the can down the road undoubtedly, but when you look at the low inflationary environment, how does this worsen the debt picture we see? >> oh, look, it's not a great time in china to be a producer of commodities, and it's not a great time in china to be a company with a lot of debt. i think as an investor, quite frankly, you want to steer away from any company with debt. you want to bes a close to this resilient parts of demand as you can be. at the center of that is the consumer. and you want to be in companies that generate a lot of cash flow. i don't think the credit cycle is under way is really understood properly. i think we need more data on that. hopefully the banks will come out with some improved numbers or at least more realistic numbers as they report four-year results so we can get a grip on that. but you're absolutely right. this is not a time to be n
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invested in a company that has a lot of debt. >> there was hope this could trickle over into a pickup for commodities demand. that could partly help explain the rally we saw last week. goldman sachs coming out saying don't buy it, this is not directed at the metalings sector. do you agree? >> one of the first indicators we saw that there was some improvement in the company was actually the chinese steel price, which started going up quite a few weeks ago. it seems to have just fed through to iron ore over the last couple days. i think a lot of this move in commodities is probably just positional changes. shorts being covered, shorter term traders altering their positions. i think where do we go from here, i'm really not sure commodities is an area i'd be looking to add to. those businesses have still got
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a lot of debt. >> when you hold that position and we talk about the five-year plan, looking at ways to reduce spending within commodities, really cut back some of the factories, layoffs here under way, some analysts suggest that could take time to trickle through. just how long are we talking about? >> oh, for sure. things in china in terms of planning and implementation take time to trickle through, especially if they require any people to lose their jobs. one of the things about china is you're going to see conflicting data. good news, bad news, pockets of strength, and also areas of weakness for the coming years, to be honest. i think the chinese investment case has got much more complex, and the data i think will sort of reflect that. but given the lending we've seen, i would expect some macro improvement, but i think it's kicking the can down the road. >> all right. staying in there for the long haul then. charlie, pleasure to have you with us this morning. thanks for joining us.
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meanwhile, bank of england governor mark carney is speaking before the treasury select committee, as you can see there. we have the committee with live pictures, and we did just get a few words here coming out of carney. we know he's talking about potential risks as we head into that eu referendum slated for june. carney is saying he will not provide comprehensive analysis of the economic advantages and disadvantages of eu membership. there, of course, trying to maintain an a political, neutral stance. but he has said cameron's negotiations do identify issues that are important. carney saying that remaining in the eu poses risks related to the development of the eurozone. finally, carney also saying that the financial transaction tax is not an issue for financial stability.
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so here we have carney laying out the risks on both sides of the issue here when we talk about the eu referendum in june but being very careful not to take a political stance one way or the other. meanwhile, let's bring you up to date on all the u.s. political action under way. michael bloomberg has now decided he is not going to run for the white house. the former new york mayor explained he feared an independent bid would split the vote and could increase the chances of donald trump or ted cruz winning. now, in an article on his website, bloomberg said, quote, that's not a risk i can take in good conscience. meanwhile, donald trump is looking at a less certain path to nomination after a series of contests over the weekend, which leave him leading ted cruz by fewer than 90 delegates. katy tur has more on that story. >> thank you so much, everybody. >> reporter: donald trump on the offensive. >> this guy is such a scoundrel. >> reporter: as the race for the nomination gets fierce. today it's starting to look more like a two-man battle after he and ted cruz split wins over the
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weekend. >> i would love to take on ted one on one. that would be so much fun. because ted can't win new york. he can't win new jersey. >> reporter: to ensure that face-off, trump is out with his first tv attack ad aimed to take out marco rubio. >> all talk, no action. >> a vote for john kasich or a vote for ted cruz in florida is a vote for donald trump. >> reporter: rubio and john kasich suddenly within striking distance in their home states. right now trump is only up 87 delegates to cruz. 536 are at stake in the coming week, but trump's path forward is hinging on next tuesday. the winner take all states of florida and ohio. if he banks both, he gets the space he needs to break away. but if he loses to marco rubio in florida and john kasich in ohio, locking down the nomination gets tough. and trump will need to win nearly 70% of the remaining delegates to stave off a convention floor fight. >> if we win florida, it's over. if we win florida and ohio, it's
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really over. >> reporter: today in concord, north carolina, trump again calling on his supporters to raise their right hand. >> i swear i'm going to vote for donald trump next week. >> reporter: a request he first made in orlando on saturday. images of which went viral. >> and remember, you can always get in touch with us. we want to hear your thoughts on the election. we have the big michigan primary under way soon. get in touch with me directly on twitter. that' that's @nancycnbc. >> shifting to tech, approximately 80% of african small and medium-size businesses have limited or no access to credit. in order to help bridge that gap, ovamba has developed a risk evaluation system to determine the credit worthiness of potential buyers. joining us now is the global chief operations officer at
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ovamba solutions. first, explain to us exactly how ovamba works. is it very similar to the models we've come to know with peer-to-peer lending? it seems to be you have quite a bit of difference when it comes to credit quality. >> absolutely. ovamba was a concept that we came up with when we started to look around the market and saw what a difficult time the african smes were having with accessing credit. but it wasn't just that they couldn't get their hands on money. the problem was that the scoring and the management of that money was being done in a way that was open to disruption. what ovamba does is source short-term sources of credit at a finance for these businesses from institutional sources by using proprietary underwriting system that does something no one else on the planet does. it uses african cultural and tribal data that we collect
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through our data science teams, and we use that embedded into the risk model. >> so how long has this been running, and do you have any better idea of the success here? what is your default rate like? >> we are very proud to say for a market that's known for just doom and gloom, we have a default rate less than 2% and has close to 100% recoverability. all of the transactions that ovamba funds is fully collateralized, which is appropriate for the market. >> and when we talk about the default rates, we also talk about the time horizon here. and what about concerns over liquidi liquidi liquidity? that seems to be the chief concern when we talk about peer- peer-to-peer lending. >> absolutely. as i mentioned, this is a short-term funding transaction and strategy we have for these businesses. that means it's six months. for those who are really good and have a great repayment history, one year is appropriate. so our customers and investors know that if they're in it for
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just the six months, within about eight monthsi, they can have full liquidity. >> and to what extent is your business being boosted by some of the more traditional banks pulling back when it comes to lending to small and medium sized businesses in africa. is that an opportunity or a concern for your business? >> i think there is an opportunity, but what is happening here is banks are -- have not been able to innovate around the need for the smaller enterprises. what ovamba does is when we stand in that gap and bridge the distance between smes and capital, we constantly evolve our technology with our mobile forward applications and the fact that we're the first company in africa to be able to allow smes to apply for funding and get an answer and approve on a smartphone. >> all right. well, i'm afraid that's all we
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have time for, for now. later today, i'll be attending a panel to talk about the women and role in fintech, the rising role, all part of international women's day. thank you for joining us. well, still coming up on the show, swiss watch maker tag huere becomes the latest sponsor to drop maria sharapova for failing a drug test. more on that after a short break.
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but they didn't know they were all tobacco products.e... ooh, this is cool. it smells like gum. yummy! this smells like strawberry. are these mints? given that 80% of kids who ever used tobacco started with a flavored product, who do you think tobacco companies are targeting? do we get to keep any?
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good morning and welcome back to "street signs." former tennis world number one maria sharapova has admitted she failed a drug test, saying she did not realize the drug had been banned by the world anti-doping agency. now, it's used to treat diabetes and low magnesium, but it has also been linked to increased
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athletic performance and endurance. sharapova's long-time sponsor nike has announced it was suspending ties with the tennis star. and watch maker has also decided to cut ties. sharapova apologized to her pans, saying she takes full responsibility. >> i made a huge mistake, and i let my fans down. i've let the sport down that i've been playing since the age of 4 that i love so deeply. >> quite a shock announcement that was when just considering the last show we were talking about perhaps announcing her retirement. now we have the announcement over drug abuse. a lot of uncertainty where she goes from here. according to reuters, russia's tennis team captain continues to support sharapova, and the russian tennis federation still
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expects her to play at the upcoming olympics. well, another update on mark carney, who's been speaking before the treasury select committee here in the u.k. he's been discussing the various risks presented by the eu referendum in the u.k. that's slated for june. carney making it very clear that the bank of england will not take a stand on the debate once way or another over the u.k.'s position within the european union in keeping with the central bank's mandate. they want to stay neutral from all political debates. carney has also said it's in the u.k.'s interest that european monetary union is put on sounder footing. he's also saying that their concerns have been about potential future evolution of the eu and how that could affect the central bank's policy making tools. sterling dollar is relatively steady, off now about 0.2%. let's bring you another check on how european markets are trading this morning because we are in the red for two consecutive days now. this comes after so much optimism when we saw the three
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straight weeks of gains yesterday. now the consensus seems to be that some of that relief rally represented overbought positions, some short covering of a bounce perhaps but nevertheless, we've got the ftse 100 off about 1%, the xetra dax off 1.4% n li, in line with the french main market. all week we've been keeping an eye on the activity we've been seeing among miners here, taking a cue from the volatility in energy prices. when we look back to the lows we saw in miners hit around january 20th, we've seen this remarkable recovery. overall up over 70% before today's open. now we can see that index off just about 4.5%. we did get a note out from goldman sachs analysts saying it was a premature surge in commodities, that it wasn't sustainable. they were saying some of the things analysts had cited for rebound, including a pickup in
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china. they don't see a huge reason for a continued uptick in miners and in some of the commodities prices. they're also remaining a bit bearish on gold prices as well. meanwhile, let's see how these calls are playing out in the u.s. markets. we saw the dow and s&p 500 close in positive territory for five straight days yesterday. now a bit of a reversal. the dow call kd lower by about 115 points. the s&p 500 called lower by 16 points. the nasdaq, which did buck the trend, just closing barely in negative territory, called lower by 42 points. let's get to kevin kelly, chief investment officer at recon capital partners joining us from new york. i want to get in straight to what we're seeing in the equities space. we did see the dow and s&p once again closing up for five straight days, but it's been a very different story here in europe. is this once again all down to the commodities play or concerns
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over china? what's your take? >> well, the questions are embedding what everybody's looking at. it's all macro. this market suspeisn't really tg on fundamentals. what we're starting to see is that there's really three things going on in the market right now. you're seeing asset correlations go to near one. it's pretty interesting when you see gold up 25%, oil up 45% since the bottom, and then you have equity prices that are up since the start of the chinese new year about 10%. so that's kind of hampering the market. then you have volatility coming into the marketplace, whether it's impacting the market on the downside or when it decreases and everything lifts. then you start to get to the disconnect from fundamentals where earnings recession has started coming down. then you have got slowing economies across the globe. i mean, it's an interesting market to be in. it's not very healthy. you're seeing that being
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reflected in the capital markets, even where there was an ipo to start the year. >> you mention this close correlation we continue to see. after that strong rally, we have oil back in the red. some saying wti could be capped for the moment. do you think that means the equities upside is limited? >> yeah, it's definitely limited, due to the fact one of the reasons why you started to see the market move up is because oil went up. a lot of the oil producers were able to issue shares. there was over $9 billion of secondary issuances. this helped solidify the companies for the next couple quarters. what that really did, too, is that compressed spreads in the high-yield market. people in the credit markets are more skittish to begin with, but now the spread is starting to compress, so that was reflected
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in equity prices. when oil starts getting to $40 a barrel, everyone is going to start selling as much of it as they can because they have to generate that revenue. >> sure. and certainly that could throw doubts into this output freeze we've been talking about. i want to get back to something you said on the earnings recession as well. earnings season has been somewhat mixed, some bright spots within that. overall looking at the u.s. equity picture, are there any stocks you like? >> there are a couple stocks we like. some of them are great names people already have in their portfolios. they've been having to sell it to cover a lot of their shorts. names like microsoft. it gives a 2.8% dividend. it's trading at an 18 pe. it's growing very well. they're not overlevered. think about that. they have a great balance sheet. look at caterpillar. it was up some 3% yesterday.
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it's trading at 20 times earnings. it's really been levered to china. they've got a big debt overhang. think about this. china isn't trying to be an industrials dominant player anymore. they're trying to move to a consumer economy. so why are people paying up 20 times earnings, especially when those earns were pretty bad last quarter because they were using financial al canmy to move pension expenses around. that's the problem. we're talking about the u.s. names over here. they're trading at 22 times gap earnings, which is cyclicly high. a lot of people start to use nongap earnings when they're reporting. when you look at the fundamentals and $90 and trading at 22 times that, you have to be very careful and get into those safe names that aren't levered, do pay a dividend, and are growing. microsoft is one of them. >> how do you view the transport sector? that was extremely hard hit when we kicked off the year. a lot of investors looking to the transports for clues over
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the further direction as somewhat of a leading indicator. now we're seeing a bit of a relief rally there. do you think that can hold? >> i don't think the relief rally can hold. if we start to look at what's happening, there is an industrial recession here in the united states. you can see that in the job numbers. you can see that in the earnings report. i mean, if you look at manufacturing numbers off 9,000 and adp numbers, which is the private sector. we're not seeing that at all. this is kind of a relief rally off the dash for trash. >> okay. kevin, i'm afraid that's all we have time for. >> great being on with you. >> "worldwide exchange" is coming up neblgs. next.
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good morning. breaking overnight, chinese exports drop more than 25%. the biggest decline since 2009, but this number is not as bad as it might sound. new this morning, investors taking a bite out of shake shack. shares slammed after disappointing numbers. the big news this morning, michael bloomberg says he won't mount an independent bid for the white house. it's tuesday, march 8th, 2016. "worldwide exchange" begins right now.


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